At Amazon, we worked on Prime Video and Amazon Music for 8 years before they were successful. We kept going because the total addressable market (TAM) is enormous— nearly every household on Earth listens to music and watches video. When deciding between several good new product or business ideas, pick the one with the highest TAM.
Achieving success with a new product or business is hard. In most cases, it takes years of iteration, investment, and staying in the market until the timing is right.
In contrast, coming up with new product or business ideas is relatively easy. At Amazon, we reviewed tons of new product and business ideas every year. Lots of these ideas were very good, but did not make the cut simply because the relative TAM was smaller than that of other ideas.
In choosing between ideas, we always picked the ones with the biggest TAM.
It takes the about the same amount of effort to start and manage a small business as it does a large one.
So, using TAM as a factor in deciding what to focus on is one of the most valuable things that any business can learn from Amazon.
You want all of the work to have a higher payoff in the end.
